10% or 20% down on a $350,000 home: what it really costs

The example

A $350,000 home, a 30-year fixed loan at 6.75%, property tax of $3,850 a year (1.1%), homeowners insurance of $1,400 a year and private mortgage insurance (PMI) at 0.6% of the loan a year when the down payment is under 20%.

With 10% down ($35,000)

The loan is $315,000. Principal and interest come to $2,043.08 a month. Add $320.83 of tax, $116.67 of insurance and $157.50 of PMI and the payment is $2,638.08.

PMI lasts 98 months, a little over eight years, until the balance falls to 80% of the price; it costs $15,435 in total. Over 30 years the interest is $420,513.47.

With 20% down ($70,000)

The loan is $280,000, principal and interest are $1,816.07 and there is no PMI, so the payment is $2,253.57: $384.51 a month less than with 10% down.

Total interest is $373,790.68, which is $46,722.79 less, and the $15,435 of PMI disappears. The extra $35,000 up front saves about $62,000 over the life of the loan.

Or keep the cash and pay extra later

Paying $200 a month extra toward principal on the 20% loan cuts the interest to $266,210.94, saving $107,579.74, and pays the loan off 89 months (7 years 5 months) early. Extra payments work best early, when most of each payment is interest.

Which is better depends on what else the money could do: an emergency fund comes first, and high-interest debt should usually be paid before the mortgage.

Try it with your numbers

Open the example in the mortgage calculator, change the price, rate and down payment, and use Pin & compare to keep one scenario on the tape while you try the other.